Mimimum Wage and Welfare

“…there’s a huge segment of the black population for whom upward mobility is elusive, and it’s because of the welfare state — because of government.” “Poverty programs destroy the natural mechanisms that have always enabled poor people to lift themselves out of poverty.” (Walter Williams of George Mason University from his book “Race and Economics”)

All quotes herein – Walter Williams, unless otherwise cited

What are those natural mechanisms?

A big one is not being comfortable in poverty. The more comfortable a person is, the less likely they are to move up the economic ladder. Lower paying jobs are supposed to be temporary stepping stones. They are not supposed to be sources of a “Living wage”.

Forcing a higher wage, not only decreases the number of Jobs, due to higher labor costs, but also delays or stops upward mobility from those lower paying jobs. The minimum wage tips the scale for low educated, low skill workers to stay in Fast food as a career. Even if they wanted to move up, minimum wage makes it too expensive for employers to train them on the job. Their low pay invokes cries to raise the minimum wage, which, when raised, makes it worse. It is a vicious cycle.

“People have the misguided notion that the minimum wage is an antipoverty tool.” “Put yourself in the place of an employer who must pay $7.25 no matter whom you hire. Will that employer hire a person who can only add $3 or $4 of value per hour?”

Like most government interventions. the solution is the problem.

Minimum wage creates the need for minimum wage.

Minimum wage is another hidden tax . The employer pays this tax in the form of wages and passes the cost to the consumer.

Minimum wage laws buy the votes of minimum wage workers.

For employers who pay their workers above the minimum wage, the higher the Minimum wage the less the competition. Increases in the minimum wage raise the costs of their rivals. This is why unions have typically been in favor of the minimum wage even when their own workers make much more than the minimum.

It doesn’t work – Despite spending trillions of dollars on poverty programs, 12 percent of the population has remained at the poverty level for the last 40 years.

Minimum wage laws disrupt the free market.

A survey of the American Economic Association found that 90 percent of economists say the minimum wage increases unemployment.

One company closes because it can’t afford to pay higher wages. Another decides to produce its product with fewer workers, and another never expands.

Those who aren’t laid off do more work for the same pay.

With people stuck in, what should be, entry level jobs, the need for Welfare, Medical and other subsidies rises.

Unseen victims. Perhaps most importantly, there’s the business that never opens. The people who were never hired don’t complain—they wouldn’t know whom to blame—they don’t even know that they were harmed.

Racist minimum wage laws were passed in South Africa to protect white workers from having to compete with low-skill, low-wage black workers. In the US the Davis-Bacon Act of 1931 did the same.

This act required that “prevailing wages” be paid on government construction projects, which usually meant high union wages. Lower skilled black construction workers were no longer affordable at the higher wages and blacks could not get into construction unions. Blacks were shut out of the market and lost their jobs.

Minimum wages were required under the National Industrial Recovery Act of 1933 and the Fair Labor Standards Act of 1938 causing black unemployment across a wider range of industries.

Younger people with less experience and skills are not hired and so it becomes that much harder to gain the experience and skills needed to rise out of poverty. This hurts black teens most because “many of them get a fraudulent education in the public school system” , [emerging without basic skills]. So a law that discriminates against low-skill people has a doubly negative effect on black teenagers. The unemployment rate among black teens today is unprecedented in U.S. history. In the ’40s, black teenage unemployment was less than white teenage unemployment.“

Welfare creates dependency, keeps people in poverty and breaks up the family.

“The welfare state has done to black Americans what slavery (and Jim Crow and racism) could not have done … break up the black family. Today, just slightly over 30 percent of black kids live in two-parent families. Historically, from the 1870s on … 75-90 percent of black kids lived in two-parent families.”

Before welfare “people would decide, ‘I’m going to go out and get a job, I’m going to live more responsibly.’ ” including getting married before having children, which the welfare system discourages.

Without the family, responsibility and values are not learned. Instead Crime and gangs flourish.